Best of the Week
Most Popular
1.Gold Price Crash Through Key Support, Crude Oil in Freefall - Clive_Maund
2.Marc Faber Warns Japan's Bond-Buying Program is a Ponzi Scheme - Bloomberg
3.Silver Price and Powerful Forces - DeviantInvestor
4.Stocks Bear Market Catastrophe as Stocks Flash Crash to New All Time Highs - Nadeem_Walayat
5.Marc Faber Warns Not to Hold Any Gold in the U.S. - GoldCore
6.U.S. Housing Market San Francisco at Critical Mass - Harry_Dent
7.Global Scramble For Silver - Coins “Hard To Get,” “Premiums Likely To Jump” - GoldCore
8.Major World Stock Market Indices Analysis: SPY, QQQ, DAX, FTSE, CAC, HSI - Michael_Noonan
9.Japan's kaput?! - Axel_Merk
10.Tesco Empire Strikes Back, £5 off £40 Discount Voucher Spend Explained, Exclusions Warning! - Nadeem_Walayat
Last 5 days
Gold's Volatility and Other Things to Watch - 21st Nov 14
Australia Stock Market and AUD Dollar Analysis (ASX200 and AUDUSD) - 21st Nov 14
New Algae Research May Have Uncovered an “Energy Forest” Under the Sea - 21st Nov 14
The Cultural and Political Consequences of Fiat Money - 20th Nov 14
United States Social Crisis - No One Told You When to Run, You Missed the Starting Gun! - 20th Nov 14
Euro-Zone Tooth Fairy Economics, Spain Needs to leave the Euro - 20th Nov 14
Ebola Threat Remains a Risk - New Deaths in Nebraska and New York - 20th Nov 14
Stock Market and the Jaws of Life or Death? - 20th Nov 14
Putin’s World: Why Russia’s Showdown with the West Will Worsen - 20th Nov 14
Making Money While The World Burns - 20th Nov 14
Why This "Quiet Zone" Is Now Tech Stocks Biggest Profit Sector - 20th Nov 14
My Favorite Stock McDonalds Just Got Kicked Off My “Buy” List - 19th Nov 14
European Economies in Perpetual State of Shock, What's Scarier Than Deflation? - 19th Nov 14
Breakfast with a Lord of War and Nuclear Weapons - 19th Nov 14
The U.S. Economy’s Ebb and Flow - 19th Nov 14
What You Need to Know Before Investing in Alibaba - 19th Nov 14
Forget About Crude Oil Price Testing 2009 Low - 19th Nov 14
What Blows Up First? Part 5: Shale Oil Junk Bonds - 19th Nov 14
Bitcoin Price Did We Just See an Important Slump? - 18th Nov 14
How to Profit From Oversold Crude Oil Price - 18th Nov 14
Stock Valuations Outrunning Profits Growth - And the Band Played On - 18th Nov 14
ECB Buy Gold Bullion? Japan's Monetary Policy Dubbed "Ponzi Scheme" - 18th Nov 14
Gold, Silver, Crude and S&P Ending Wedge Patterns - 18th Nov 14
How High Could USD/JPY Go? - 18th Nov 14
On Obama and the Nature of Failed Presidencies - 18th Nov 14
Globalism Free Trade Immigration Connection - 18th Nov 14
An Epiphany From Hell - Buy Gold and Silver - 18th Nov 14
Too Difficult to Get a U.S. Home Loan - 18th Nov 14
Has the Gold Bear Trap Been Set - 18th Nov 14
Gold Price and Miners Soar on Huge Volume - 17th Nov 14
Cameron Says Second Global Economic Crash is Loomin, Japan in Recession - 17th Nov 14
How to Play the Stock Market 2014 Year-End Rally - 17th Nov 14
What The Fed Has Wrought, Who Needs Wage Earners Anyway? - 17th Nov 14
Stock Market Indexes Fluctuate Along Record Levels - Will Uptrend Continue? - 17th Nov 14
Stock Market Trend Deceleration Tends To Precede Corrections - 17th Nov 14
Stocks Bull Market Set to Continue After Consolidation - 17th Nov 14
The World Is Run By Fools, And We Let Them - 17th Nov 14
Gold Price Golden Bottom? - 17th Nov 14
Gold Dragons Grand Strategy - 16th Nov 14
Gold and Silver 2015 Trend Forecasts, Prices to Go BOOM - 16th Nov 14
Stocks Bull Market Grinds Bears into Dust, Is Santa Rally Sustainable? - 16th Nov 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Dramatic Stock Market Selloff

How Will I Know When To Sell My Gold?

Commodities / Gold and Silver 2013 Dec 06, 2012 - 12:59 PM GMT

By: DeviantInvestor

Commodities

NEVER sell your gold because you want to hold it for the rest of your life and pass it on to your grandchildren.

Or

Sell your gold NOW (big mistake – my opinion) if you believe that gold is in a bubble or never should have been bought (as per “gold-bashers” Warren Buffett and Charlie Munger).


Most of us will sell sometime between now and never. What is an objective method to determine when to sell?

Technical ratios at which it might be sensible to sell some of your gold

Sell some gold when the gold to silver ratio drops down to around 15 to 1. The gold to silver ratio is currently about 51 to 1. When gold and silver prices have both risen beyond all typical expectations, the ratio will probably drop to between 10 and 20 to 1. The ratio was about 17 to 1 at the bubble peak in 1980.

Sell some gold when the Dow Jones Industrial Average (DOW) ratio to gold (DOW/Gold) has dropped to near 1 to 1. The ratio is currently about 7.5 to 1. The ratio could reach 1 to 1, for example, if the Dow were priced at 10,000 and gold was selling for $10,000 per ounce. At the peak of the 1980 gold bubble, the ratio was approximately 1 to 1.

Sell some gold when the gold to crude oil ratio rises to perhaps 30 to 1. For example, if crude oil is priced at $300 per barrel and gold is priced at $9,000, that is a 30 to 1 ratio. In 1980 the peak ratio was about 25 to 1.

Sell some gold when you can pay off the entire mortgage on your house with 10 to 20 ounces of gold.

(I suggest you only sell “some” of your gold, not all of it, because it is always a good idea to keep some “real money” and not be utterly dependent upon unbacked paper currency.)

Sentiment-based timing to consider selling gold

Sell some gold when the “money honeys” on financial TV are running one story per hour on the rapidly rising price of gold.

Sell some gold when Time magazine posts a picture of gold bars on their cover with a caption “The new bull market in gold.”

Sell some gold when your hairdresser/barber gushes about the gold she/he just bought and how it is sure to triple in price soon.

Sell some gold when there are lines of people waiting at coin shops to buy gold.

Sell some gold when people finally realize that “money (unbacked paper money) is accepted only because money is accepted,” and people have become reluctant to accept paper money.

Sell some gold when people have realized that money only has value because people have faith in its value, and people have finally lost faith in unbacked paper money.

Additional thoughts: Jim Sinclair suggests that, regarding gold, people should “buy fish lines and sell rhino horns.” Stated another way, when the price has collapsed in a price spike down (looks like a fish line extending downward from a fishing pole) then we should buy. But if the price has risen in a parabolic pattern (looks like a rhino horn), then it is time to sell a portion and wait for the correction. If the price has fallen too for, too fast, and there is no fundamental reason for the price collapse, buy more. If the price has rapidly rallied to new highs far beyond expectations, then it has moved too far, too fast. Those markets rallies, whether in gold, silver, the NASDAQ, crude oil, or real estate, always seem to correct in a crash. Examples include Gold and Silver in early 1980, the Nikkei 225 in 1990, and the NASDAQ in early 2000. It seems likely that gold and silver will go into a parabolic rise within a few years unless the money printing ceases – and we should plan on the money printing continuing for a LONG time.

The common denominators are the human emotions of fear and greed. In simple terms, greed drives the market to new highs and fear causes the crash. People were “getting rich quick” when the NASDAQ rallied from about 1,100 to about 5,000 in less than 2 years – when greed had the upper hand. But when the NASDAQ reached a natural stopping point, fear took over and people sold in panic or to preserve what value remained. If they did not sell and rode the market all the way down, they lost a significant portion of their investment and paper profits. Fear caused people to sell, which created more fear and selling, and the waterfall decline fed upon itself until the sellers were exhausted.

Similarly, in 2008, when gold had collapsed from over $1,000 to under $700 (the price today is about $1,700) in seven months, most amateur investors were reluctant to buy because they were fearful that the price of gold would decline further. Professionals buy the bottoms and sell the tops. Fearful amateurs sell down into the bottoms and then buy back near the tops when greed takes over.

If you bought gold, which is currently in a long-term uptrend, then waiting will eventually bring success, even if you purchased at a temporary top. However, if you were buying Enron Stock some years ago, then waiting only magnified the disastrous investment. Study the fundamentals of your investments until you understand the differences.

When will gold reach $4,000?

The Bottom Line: Buy when the “blood is running in the streets,” and sell when everyone else wants to buy. Use ratios from other markets as objective measures to indicate probable price extremes in markets. We can seldom pick the precise bottoms and tops, but we can carefully observe while others are being swept along by their own fears and greed. If we can keep our heads while others are losing theirs and make sound decisions based on numbers, analysis, and comparison ratios to other markets, we can make intelligent and informed buy and sell decisions. For now, it makes sense to me to hold gold and silver and to carefully evaluate everything else. Massive and supposedly unexpected changes can occur with surprising rapidity. Check here for additional commentary

GE Christenson
aka Deviant Investor

If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2012 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

massxrateoftruth
08 Dec 12, 10:04
Question about technical ratios

Ratio of silver to gold:

In what year does the historical ratio start?

What degree are these ratios relevant?

-Understanding that a percentage of people make decisions reguarding the price in which one buys or sells when squeezing value? Or with day trading swings within applicable ranges? These are the only logical applications to historical ratios I, individually, can think of.

I understand many purposes become associated with the varying personalities buying and selling gold.

Looking at the 'purpose' gold has 'served,' suits my personality the best.

For an individual investor, "Never" seems the most appropriate.

For the one that knows the hours of boredom and moments of terror, ratios seem relevant.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014